"After a nine-month investigation, a bipartisan Senate subcommittee is expected to issue a report Monday detailing how a single hedge fund, Amaranth Advisors , dominated the North American natural gas market last year, causing high prices and extreme volatility that ultimately led to the company’s stunning collapse."

"The hedge fund at times last year controlled 40 percent or more of the natural gas contracts traded on the New York Mercantile Exchange, and as much as 75 percent in one month, according to the 135-page report by the Senate's permanent subcommittee on investigations....In order to avoid trading limits it faced on the New York Mercantile Exchange, Amaranth shifted its activity to the InterContinental Exchange Inc., an Atlanta-based electronic futures exchange that is free from such constraints, the report found."

"The report also calls for closing the so-called Enron loophole, which allowed Amaranth to do more business on electronic trading systems such as Intercontinental Exchange Inc. after being forced to reduce its positions on the New York Mercantile Exchange, where benchmark gas futures trade.

``Amaranth did not manipulate the market, and nothing in the subcommittee's report concludes otherwise,'' Dan Webb, an attorney representing Amaranth, said in an e-mailed statement. Webb said the firm agreed with a minority staff opinion in the report that Amaranth was responding to market changes rather than influencing prices."

Forbes reports that Shane Lee (the trader who took much of the criticism on the Senate report), contents that he was not to blame:

"Lee said natural gas prices were driven primarily by weather and demand for fuel. Trading would only have an impact on prices in the "extreme short term," he said."

The ICE (the Intercontinental Exchange) also has a response to the Senate Report. After (correctly) saying that many things drive prices and stressing the Friedman view that speculators (if profitable) reduce volatility, the ICE takes issue with much of the report and reminds everyone that they have improved reporting:

“With great respect for the work of the Staff, we believe that the Report does not fully reflect the level of oversight that now exists in the natural gas markets today,” said ICE Chairman and CEO Jeffrey C. Sprecher. “We are pleased to have already implemented, since the end of 2006, a large trader reporting system related to Henry Hub natural gas markets."

So what is next? The troubles at Bear Stearns will almost assuredly add volume to the calls for more regulations.